Asset managers around the world need to prepare for stricter anti-greenwashing measures and increased scrutiny of AI adoption, according to a recent analysis by KPMG.
According to the professional services firm, the UK is currently leading in the implementation of anti-greenwashing measures, as well as sustainability reporting at entity level.
“Asset managers must prepare for the continued expansion of economy-wide ESG reporting in the future,” she said.
At the local level, the Australian Securities and Investments Commission (ASIC) has increased its focus on market integrity and taken action against allegations of “misleading and deceptive conduct”.
And while Australian regulators have made progress in ensuring that product-level disclosures are up to par, they lag behind their global counterparts in developing frameworks around entity-level disclosures. and anti-greenwashing rules, KPMG warned.
Additionally, Australia has also begun the process of developing a sustainable taxonomy, with Geri McMahon, global head of ESG asset management at KPMG, encouraging local asset managers to start defining what sustainability means. means to them.
“A taxonomy of sustainable finance establishes definitions of green and transition finance, thereby increasing consistency,” McMahon said.
According to KPMG, asset managers around the world will also soon be subject to global reporting requirements intended to improve transparency around companies’ sustainability credentials.
“However, adoption is evolving at different rates across jurisdictions,” the report points out.
While countries such as Brazil, Hong Kong (SAR), China and the United Kingdom have already committed to adopting the standards, Australia is still finalizing an implementation timeline, according to the firm. professional services.
As global economies call for tighter controls on the ESG front, asset managers are also turning to artificial intelligence (AI) to help them improve their performance.
“It’s not just technology that’s evolving. The same is true for regulation, with different approaches emerging, ranging from prescriptive AI-specific rules to technology-agnostic approaches that build on the existing framework and rules,” KPMG said.
At a local level, ASIC has repeatedly identified its growing emphasis on AI, including in its 2023-2027 Business Plan.
In it, it emphasizes that existing laws regarding financial services and consumer protection, including provisions on misleading and deceptive behavior, are “technology agnostic and apply equally to AI and non-AI systems and processes “.
The KPMG report says that even as global regulators prioritize AI and the digital technology revolution, the pace of change varies significantly across jurisdictions, creating challenges for global asset managers hoping to reap the benefits of these emerging technologies.
“Asset managers should focus on considering how new technologies will work with existing architecture and addressing new risks,” Butler-Beatty said.
“The opportunity now exists for businesses to start building a solid foundation for regulatory compliance in the future. »
Piers Bolger, chief investment officer of Infinity Capital Solutions at Viridian Financial Group, admitted earlier this year that regulating AI could be “difficult” given its broad scope and adoption at different levels.
“Regulating emerging technologies is difficult. “Artificial Intelligence” is open to debate regarding what AI is and individual or company-wide perceptions, and how it fits into the way people do business “, he said.
Bolger said the regulatory guidance would require agencies like ASIC to form a robust view of the technology.
